SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) April 21, 1999
NAC Re Corp.
(Exact Name of Registrant as Specified in its Charter)
Delaware 0-13891 13-3297840
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(State or other jurisdiction of (Commission File Number) (I.R.S. Employer
incorporation) Identification No.)
One Greenwich Plaza, CT 06836-2568
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (203) 622-5200
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Item 5. Other Events.
The registrant's press release dated April 21, 1999, regarding its
financial results for the 1999 first quarter ended March 31, 1999, as well as
consolidated financial statements for the period ended March 31, 1999, are filed
herewith as Exhibits 99.1 and 99.2 respectively and are incorporated herein by
reference.
The registrant's press release dated April 23, 1999, regarding the
expansion of the registrant's stock repurchase program to repurchase up to an
additional two million shares of common stock is filed herewith as Exhibit 99.3
and is incorporated herein by reference.
Item 7. Financial Statements and Exhibits.
(c) The following exhibits are filed with this report:
Exhibit Number Description
- -------------- -----------
99.1 Press Release of the registrant, dated April 21, 1999.
99.2 NAC Re Corp. and Subsidiaries Consolidated Financial Supplement.
99.3 Press Release of the registrant, dated April 23, 1999.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
NAC RE CORP.
By: /s/ Richard H. Miller
-------------------------
Name: Richard H. Miller
Title: Chief Financial Officer
& Treasurer
Dated: April 23, 1999
<PAGE>
EXHIBIT INDEX
Exhibit Number Description
- -------------- -----------
99.1 Press Release of the registrant, dated April 21, 1999.
99.2 NAC Re Corp. and Subsidiaries Consolidated Financial Supplement.
99.3 Press Release of the registrant, dated April 23, 1999.
Exhibit 99.1
[NAC RE Corp. Letterhead]
NAC RE Corporation One Greenwich Plaza
P.O. Box 2568
Greenwich, CT 06836-2568
(203) 622-5200
FAX: 2036221494
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PRESS RELEASE
NYSE SYMBOL NRC CONTACT: Richard H. Miller
Chief Financial Officer & Treasurer
(203) 622-5535
FOR IMMEDIATE RELEASE
NAC RE REPORTS OPERATING EARNINGS INCREASE
FOR THE 1999 FIRST QUARTER
Greenwich, CT, April 21, 1999 . . . . NAC Re Corp. (NYSE-NRC) reports operating
earnings, excluding realized investment gains, of $19.1 million or $.95 per
diluted share for the 1999 first quarter. This represents an increase of 5.6%
over the $.90 per diluted share that was reported in the comparable quarter of
1998.
Net income for the first quarter of 1999 was $20.8 million or $1.03 per diluted
share, compared to $1.14 per diluted share in the first quarter of 1998. Net
income for the 1999 first quarter includes after-tax realized investment gains
of $1.7 million or $.08 per diluted share compared to $5.1 million or $.24 per
diluted share in the first quarter of 1998.
"We are particularly pleased to report another quarterly increase in operating
earnings, especially considering the difficult pricing environment in the
insurance and reinsurance industry," commented Nicholas M. Brown, Jr., President
and Chief Executive Officer. "Maintaining our disciplined underwriting approach
was a key contributor to NAC Re's improved operating results.
"As we approach the second half of 1999, we are enthusiastic about consummating
our merger with XL Capital. XL is extremely well respected and highly successful
in the worldwide insurance and reinsurance markets, offering a unique blend of
capital and innovative talent. We are confident that this combination will
create new and superior products and capabilities for our customers and we are
pleased with the overwhelmingly positive response we have received from our
shareholders, brokers and clients."
The Company's worldwide gross premiums written for the 1999 first quarter
totaled $181.1 million, an increase of 9.5% over the 1998 first quarter. The
Company's worldwide net premiums written for the 1999 first quarter totaled
$142.9 million, an increase of 4.9% over the 1998 first quarter.
<PAGE>
Press Release
April 21, 1999
Page 2
Domestic gross premiums written for the 1999 first quarter were $150.4 million,
representing an increase of 1.1% over the comparable 1998 period. Domestic net
premiums written for the 1999 first quarter were $117.9 million, representing a
decrease of 2.8% from the 1998 first quarter. Overall, the decline in net
premiums written is principally attributable to the cost of additional
retrocessional coverages purchased to limit the Company's net retention and to
supplement its core reinsurance protection. This decline was partially offset by
premium growth in the Company's primary business segment.
Domestic casualty net premiums for the 1999 first quarter were $72.1 million, an
increase of 7.2% over the 1998 first quarter. This growth is primarily
attributable to new contracts written in our treaty operation. Domestic property
net premiums for the 1999 first quarter were $25.6 million, representing a
decline of 25.5%. This decline reflects a continued soft pricing environment in
both our treaty and facultative business, as well as increases in ceded premium
charges. Net premiums written in specialty/other lines were $20.2 million, an
increase of 2.9% over the comparable 1998 period. This increase is primarily due
to growth in the Company's primary programs.
NAC Re International Holdings Limited reported consolidated gross premiums
written of $30.3 million for the 1999 first quarter, representing an increase of
68.3% over the comparable 1998 period. Net premiums written for the 1999 first
quarter were $25.0 million, an increase of 67.6% over the 1998 first quarter.
Net premiums written for the international reinsurance operation were $16.5
million for the first quarter of 1999, representing a 29.7% increase over the
comparable 1998 period. The increase in the international reinsurance operation
is attributable to growth in the casualty business resulting primarily from new
business opportunities. Net premiums written for the international primary
operation were $8.5 million for the 1999 first quarter, compared to $2.2 million
in the 1998 first quarter. The growth in premiums are attributable to
Stonebridge Underwriting Ltd., a subsidiary of NAC Re International Holdings
Limited, which is participating at Lloyd's as a corporate capital vehicle on the
Denham Syndicate.
The domestic statutory composite ratio for the 1999 first quarter was 102.4%,
compared to 102.8% for the comparable 1998 period. The first quarter statutory
composite ratio for NAC Reinsurance International Limited was 104.1%, compared
to 108.9% for the same prior year period. The Company's claims and claims
expense reserves, net of reinsurance, were $1.7 billion at March 31, 1999.
<PAGE>
Press Release
April 21, 1999
Page 3
After-tax net investment income was $26.5 million or $ 1.26 per diluted share
for the 1999 first quarter, an increase of 3.3% over the $1.22 per diluted share
in the 1998 first quarter. This increase is attributable to the growth in
invested assets. As of March 31,1999, the Company's investment portfolio of $2.4
billion consisted primarily of fixed income investments with average quality
ratings of AA/Aa2. The Company's investment portfolio generated an after-tax
yield of 4.5% in the first quarter of 1999, which is the same yield in the first
quarter of 1998.
The Company reported net cash used for operations of $1.8 million, compared to
cash flow from operations of $13.9 for the comparable 1998 period. The 1999
first quarter cash flow was lower due to increases in paid claim activity and
retrocessional costs.
Consolidated stockholders' equity totaled $752.7 million compared to $750.7
million at December 31, 1998. Stockholders' equity per basic share at March 31,
1999 was $40.79 compared to $40.86 at December 31, 1998. The unrealized
appreciation of investments, net of tax, was $40.3 million at March 31, 1999,
compared to $57.7 million at December 31, 1998, a decline of $17.4 million or
$.94 per book value share. Statutory surplus of the Company's reinsurance
subsidiary, NAC Reinsurance Corporation, was $732.9 million at March 31,1999.
Through April 1999, the Company repurchased over 421,000 shares of Common Stock
at a cost of $22.2 million or at an average cost of $52.74 per share. From the
inception of the Company's stock repurchase program in 1988, approximately 4.1
million shares have been repurchased at an average cost of $29.90 per share.
****************
NAC Re Corporation is the parent company of NAC Reinsurance Corporation which is
an "A+" rated reinsurer, licensed to write reinsurance in all fifty states, the
District of Columbia and all provinces of Canada.
NAC Re Corp news releases, including quarterly financial results, are available
on its website at www.nacre.com.
<PAGE>
Press Release
April 21, 1999
Page 4
Safe Harbor for Forward-Looking Statements
Certain statements made during the course of NAC Re Corp.'s presentation that
are not based on current or historical fact are forward-looking in nature
including, without limitation, statements containing words "believes,"
"anticipates," "intends," "expects," "estimates," "predicts," and words of
similar import. Such forward-looking statements involve known and unknown risks,
assumptions, uncertainties, and other factors that may cause actual results,
performance, or achievements of NAC Re or the industry to differ materially from
any future results, performance, or achievements expressed or implied by such
forward-looking statements.
NAC Re has identified certain risk factors which could cause actual plans or
results to differ substantially from those included in any forward-looking
statements. These risk factors are discussed in NAC Re's Securities and Exchange
Commission filings including, but not limited to, its most recent Forms 10-K,
10-Q, 8-K; Annual Report, and all such discussions regarding risk factors are
hereby incorporated by reference into this presentation. Copies of these filings
are available from NAC Re or directly from the SEC.
Exhibit 99.2
================================================================================
NAC RE CORP. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL SUPPLEMENT
================================================================================
<PAGE>
<TABLE>
<CAPTION>
(Unaudited)
Three months ended March 31,
--------------------------------------------
SUMMARY PERFORMANCE DATA: 1999 1998 % Chg
---- ---- ----
<S> <C> <C> <C>
Gross premiums written $181.1 $165.4 9.5%
Net premiums written 142.9 136.2 4.9
Net investment income:
- After-tax 26.5 25.6 3.4
- Pretax 32.9 32.1 2.6
Cash flow from operations (1.8) 13.9 (112.8)
Statutory composite ratio:
- Domestic 102.4% 102.8%
- International 104.1% 108.9%
- Consolidated 102.6% 103.5%
PER SHARE DATA:
Basic:
Average shares outstanding 18,411 18,355
--------- ---------
Operating, excluding investment gains $1.04 $0.97 7.2%
Investment gains, net of tax 0.09 0.28
--------- ---------
Net income $1.13 $1.25 (9.6)%
========= =========
Diluted (assuming conversion of
dilutive convertible securities):
Average shares outstanding 21,000 20,954
--------- ---------
Operating, excluding investment gains $0.95 $0.90 5.6%
Investment gains, net of tax 0.08 0.24
--------- ---------
Net income $1.03 $1.14 (9.6)%
========= =========
MARCH 31, DECEMBER 31, %
1993 1998 Chg
------------------- ------------------- ------------------
BALANCE SHEET DATA:
Total assets $3,248.3 $3,227.6 .6%
Cash and invested assets (A) 2,413.9 2,448.8 (1.4)
Stockholders' equity 752.7 750.7 .3
Per basic share (B)(C) 40.79 40.86 (.2)
Per diluted share 41.62 41.69 (.2)
Statutory surplus 732.9 737. (.6)
</TABLE>
(A) Excluding net investment payables of $7.6 million for 1999 and 1998.
(B) Shares outstanding are 18,452,660 and 18.374,355, respectively.
(C) Assuming bonds are carried at amortized cost, stockholders' equity per
basic share would be $38.77 and $37.96, respectively.
- 1 -
<PAGE>
NAC RE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
(Unaudited)
Three months ended March 31,
----------------------------------------
<S> <C> <C>
1999 1998
-------------- --------------
PREMIUMS AND OTHER REVENUES
Net premiums written $142,871 $136,190
Increase in unearned premiums (10,206) (2,836)
-------------- --------------
Premiums earned 132,665 133,354
Net investment income 32,905 32,085
Net investment gains 2,673 7,874
-------------- --------------
Total revenues 168,243 173,313
Operating Costs and Expenses
Claims and claims expenses 84,022 88,692
Commissions and brokerage 35,980 33,443
Other operating expenses 17,966 17,126
Interest expense 5,402 5,426
-------------- --------------
Total operating costs and expenses 143,370 144,687
INCOME
Income before income taxes 24,873 28,626
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Federal and foreign income taxes:
Current 3,793 6,684
Deferred 252 (1,064)
-------------- --------------
Income tax expense (benefit) 4,045 5,620
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Net income $20,828 $23,006
============== ==============
PER SHARE DATA
Basic:
Average shares outstanding 18,411 18,355
Operating, excluding investment gains $1.04 $0.97
Investment gains, net of tax 0.09 0.28
-------------- --------------
Net income $1.13 $1.25
============== ==============
Diluted (assuming conversion of
dilutive convertible securities):
Average shares outstanding 21,000 20,954
Operating, excluding investment gains $0.95 $0.90
Investment gains, net of tax 0.08 0.24
-------------- --------------
Net income $1.03 $1.14
============== ==============
Cash dividends declared per share $0.09 $0.075
============== ==============
</TABLE>
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<PAGE>
NAC RE CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In thousands)
<TABLE>
<CAPTION>
(Unaudited)
March 31, December 31,
1999 1998
---------------- ----------------
ASSETS
Investments:
Available for sale:
<S> <C> <C>
Fixed maturities (amortized cost: 1999, $2,122,326; 1998, $2,108,692) $2,179,670 $2,190,617
Equity securities (cost: 1999, $87,517; 1998, $108,276) 92,140 115,064
Short-term investments 136,669 146,828
---------------- ----------------
TOTAL INVESTMENTS 2,408,479 2,452,509
Cash 13,042 3,915
Accrued investment income 37,318 36,270
Premiums receivable 249,875 239,674
Reinsurance recoverable balances, net 284,897 262,872
Reinsurance recoverable on unearned premiums 43,017 49,962
Deferred policy acquisition costs 101,944 98,874
Excess of cost over net assets acquired 7,861 8,013
Deferred tax asset, net 48,211 37,481
Other assets 53,657 38,062
---------------- ----------------
TOTAL ASSETS $3,248,301 $3,227,632
---------------- ----------------
LIABILITIES
Claims and claims expenses $1,732,095 $1,718,237
Unearned premiums 344,133 341,443
8% Notes due 1999 100,000 100,000
7.15% Notes due 2005 99,951 99,949
5.25% Convertible Subordinated Debentures due 2002 100,000 100,000
Investment accounts payable 7,612 7,612
Revolving credit agreement 12,924 12,924
Other liabilities 98,903 96,742
---------------- ----------------
TOTAL LIABILITIES 2,495,618 2,476,907
---------------- ----------------
STOCKHOLDERS' EQUITY Preferred stock, $1.00 par value:
1,000 shares authorized, none issued
(Includes 277.5 shares of Series A Junior Preferred Stock) - -
Common stock, $.10 par value:
25,000 shares authorized (1999, 22,069; 199 8, 21,991 shares issued) 2,207 2,199
Additional paid-in capital 271,587 268,468
Accumulated other comprehensive income 42,411 62,778
Retained earnings 535,204 516,036
Less treasury stock, at cost (1999, 3,616; 1998, 3,617 shares) (98,726) (98,756)
---------------- ----------------
TOTAL STOCKHOLDERS' EQUITY 752,683 750,725
---------------- ----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $3,248,301 $3,227,632
================ ================
</TABLE>
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<PAGE>
NAC RE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(In thousands)
<TABLE>
<CAPTION>
(Unaudited)
---------------------------------------------------------------------------------------------
Accumulated
Other Total
Common Paid-in Comprehensive Retained Treasury Comprehensive Stockholders'
Stock Capital Income Earnings Stock Income Equity
----- ------- ------ -------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, At December 31, 1998 $2,199 $268,468 $516,036 ($98,756) $62,778 $750,725
Comprehensive income:
Net income $20,828 20,828 20,828
Other comprehensive income,
net of tax:
Unrealized depreciation of
investments (17,382) (17,382)
Currency translation adjustments (2,985) (2,985)
-------
Other comprehensive income (20,367) (20,367)
--------
Total comprehensive income $461
====
Issuance of shares 8 3,119 3,127
Dividends declared on common stock (1,660) (1,660)
Reissuance of treasury shares 30 30
----------------------- ----------------------------------------------------
Balance at March 31, 1999 $2,207 $271,587 $535,204 ($98,726) $42,411 $752,683
----------------------- ----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
(Unaudited)
--------------------------------------------------------------------------------------------
Accumulated
Other Total
Common Paid-in Comprehensive Retained Treasury Comprehensive Stockholders'
Stock Capital Income Earnings Stock Income Equity
----- ------- ------ -------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, At December 31, 1997 $2,171 $255,424 $426,309 ($87,832) $60,989 $657,061
Comprehensive income:
Net income $23,006 23,006 23,006
Other comprehensive income,
net of tax:
Unrealized appreciation of
investments 3,384 3,384
Currency translation adjustments 908 908
---
Other comprehensive income 4,292 4,292
-----
Total comprehensive income $27,298
=======
Issuance of shares 7 2,482 2,489
Dividends declared on common stock (1,377) (1,377)
Purchase of treasury shares, net of
reissuance (2,326) (2,326)
----------------------- -----------------------------------------------------
Balance at March 31, 1998 $2,178 $257,906 $447,938 ($90,158) $65,281 $683,145
======================= =====================================================
</TABLE>
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<PAGE>
NAC RE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
(Unaudited)
Three months ended March 31,
----------------------------------------
1999 1998
---------------- ----------------
OPERATING ACTIVITIES
<S> <C> <C>
Net income $20,828 $23,006
Adjustments to reconcile net income to net cash
provided by operating activities:
Reserve for claims and claims expenses, net (4,866) 4,929
Unearned premiums, net 10,347 2,819
Premiums receivable (11,077) (1,991)
Accrued investment income (1,111) 2,848
Reinsurance balances, net 4,834 6,508
Deferred policy acquisition costs (3,233) (805)
Net investment gains (2,654) (7,874)
Deferred tax asset, net 231 (1,082)
Other liabilities 6,787 (4,002)
Other items, net (21,872) (10,455)
---------------- ----------------
NET CASH (USED FOR) PROVIDED BY OPERATING ACTIVITIES (1,786) 13,901
---------------- ----------------
INVESTING ACTIVITIES
Sales of fixed maturity investments 230,481 310,627
Maturities of fixed maturity investments 4,237 3,522
Purchases of fixed maturity investments (253,546) (340,404)
Net sales of short-term investments 8,458 21,753
Sales of equity securities 34,655 7,951
Purchases of equity securities (13,863) (14,296)
Purchases of furniture and equipment (691) (1,799)
---------------- ----------------
NET CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES 9,731 (12,646)
---------------- ----------------
FINANCING ACTIVITIES
Issuance of shares 2,780 2,309
Net reissuance (purchase) of treasury shares 30 (2,326)
Cash dividends paid to stockholders (1,652) (1,372)
---------------- ----------------
NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES 1,158 (1,389)
---------------- ----------------
Effects of exchange rate changes on cash 24 142
---------------- ----------------
Increase in cash 9,127 8
Cash - beginning of year 3,915 8,430
---------------- ----------------
Cash - end of period $13,042 $8,438
---------------- ----------------
- 5 -
</TABLE>
Exhibit 99.3
[NAC RE Corp. Letterhead]
NAC RE Corporation One Greenwich Plaza
P.O. Box 2568
Greenwich, CT 06836-2568
(203) 622-5200
FAX: 2036221494
- --------------------------------------------------------------------------------
CONTACT:
Richard H. Miller
(203) 622-5535
FOR IMMEDIATE RELEASE
NAC RE CORP. INCREASES ITS STOCK REPURCHASE AUTHORIZATION
Greenwich, CT, April 23, 1999 --- NAC Re Corporation (NYSE:NRC) announced today
that the Board of Directors has approved the expansion of the Company's stock
repurchase program initially authorized in January 1988. The Board authorized
the Company to repurchase up to an additional two million shares of Common
Stock. The Company has repurchased approximately four million shares of its
Common Stock since the inception of the program, including approximately 400,000
shares thus far in 1999.
NAC Re Corporation is the parent company of NAC Reinsurance Corporation, which
is an "A+" rated reinsurer licensed to write business in all fifty states, the
District of Columbia and all provinces of Canada.
